MONTREAL – Botox-maker Allergan has unanimously rejected an improved takeover offer from Valeant Pharmaceuticals and once again slammed the door on discussions.

Allergan said Tuesday that the new offer still undervalues the California-based company and creates significant risks and uncertainties for its shareholders.

“In addition, we do not believe your latest proposal offers sufficient or certain value to warrant discussions between Allergan and Valeant,” Allergan chairman and CEO David Pyott wrote in a letter to Valeant CEO Michael Pearson.

With the backing of activist shareholder Bill Ackman of Pershing Square Capital Management, Valeant (TSX:VRX, NYSE:VRX) raised its stock-and-cash bid to about US$176 per share, valuing Allergan at US$52.7 billion, based on closing share prices Tuesday.

The offer of US$72 in cash and 0.83 of a Valeant share for each Allergan share is contingent on “good faith negotiations” of a merger agreement.

Allergan (NYSE:AGN) repeated its claim that Valeant has an unsustainable business model that relies on “serial” acquisitions and cost reductions, as opposed to revenue growth and operational excellence.

It pointed to “a lack of clarity” surrounding Valeant’s growth potential because of its suitor’s “opaque pro-forma” financial reporting which doesn’t fully indicate how past acquisitions and products are performing. Allergan also said Valeant’s growth is primarily driven by significant price increases and its cost-savings targets would destroy Allergan’s long-term value.

In a presentation filed with the U.S. securities regulator, Allergan said Valeant has suffered volume decreases in 11 of its top 15 worldwide pharmaceutical products.

“As we have indicated previously, the Allergan board has serious concerns about the large stock component of your proposal and the recent presentations by both you and Pershing Square did nothing to address the issues we previously raised,” Pyott added.

In contrast, the U.S. company said its strategy will provide double digit sales growth and 20 per cent annual compounded earnings per share increases.

Valeant responded to the latest rejection from Allergan by accusing its rival of repeating inaccurate assertions about its operations.

“Rather than discussing the benefits of the proposed combination with Valeant, Allergan’s Board continues to throw out inaccurate and misleading statements about Valeant and is recycling the same unsupported arguments about Valeant that have already been addressed, leaving us no choice but to take our offer directly to shareholders,” spokeswoman Laurie Little wrote in an email.

Ackman, Allergan’s largest shareholder, has moved to call a special meeting of shareholders at the U.S. company in a bid to replace a majority of its directors. However, the process could be delayed until well into November.

In separate messages to Allergan employees and customers, Pyott warned the process could last through the end of the year.

“I would like to thank all Allergan employees around the world for avoiding these distractions to date and for staying focused on meeting and exceeding the expectations of our customers and continuing to deliver innovative products that help to improve the lives of their patients,” he said.

Pyott also thanked physicians and health-care providers around the world for sharing their concerns about the potential impact of Valeant’s offer, particularly on research and development and future innovation, adding that it “remains business as usual” at Allergan as it moves through the process.

Analyst David Maris of BMO Capital Markets said investors should prepare for a long battle that could extend well into 2015 and pegs the likelihood of Valeant succeeding at less than 50 per cent.

“We are still in the early innings and believe Allergan and Valeant are geared up for a long fight and investor call volume remains high on the situation,” he wrote in a report.

Maris added that Allergan has options — including buying back its shares, raising its dividend and combining with another company — but to his knowledge hasn’t authorized investment banks to explore strategic options.

“The debate, in our view, has shifted to what is Valeant and what is it worth?” he said, pointing to increasing questions about Valeant’s growth metrics.

Marc Goodman of UBS believes Allergan is determined to reject Valeant and seems to be headed to reducing costs on its own to reduce how much Valeant can gain by its own cost-cutting.

Shibani Malhotra of Sterne Agee said the rejection by Allergan’s board was “largely expected by investors.”

He said Allergan’s plan to update investors around the time of its second-quarter earnings call in less than two months suggests the company “is not in any rush to negotiate.”

Allergan and Valeant’s shares were down in Tuesday trading, which analysts said suggests that investors don’t have confidence a deal will be reached. Allergan’s shares closed down $1.06 to US$163.09 in Tuesday trading on the New York Stock Exchange, while Valeant shares fell $1.08 to US$125.55.